Key Market – Greece

Likely one of the strongest opportunities for LPG Power Generation in Europe, driven by lack of natural gas infrastructure throughout many of the country’s islands, and an ambition to move away from diesel Headlines on the outlook for LPG Power Generation in Greece:

Low and decreasing natural gas prices, along with plans to expand the reach of the natural gas infrastructure means LPG may find it difficult to compete as an electricity generation alternative.

LPG may find opportunities, however, on many of the as yet non-interconnected Greek islands which currently use expensive diesel generators.

There may also be potential to replace oil back-up generation and meeting the shortfall in domestic production during periods of high electricity demand.

Below, we discuss the key factors that influence the outlook for LPG Power Generation in Greece in more detail.

Energy prices – High diesel prices with weakening policy support presents a good opportunity for LPG

With natural gas becoming a larger part of the electricity generation mix in Greece and its price decreasing over recent years as a result of the drop in oil price (as illustrated in Figure 9), it will become more difficult for LPG to compete as an alternative electricity generation fuel. However, the use of oil stocks held by industry continues to be central to Greece’s emergency response policy. There may be an opportunity for LPG to replace much of this back-up generation by proving it can be a more economic, cleaner alternative.

Electricity & natural gas grid infrastructure – Short / medium term opportunity to provide power to off-grid islands, but likely to be displaced by renewable sources in the longer term.

Among the 83 inhabited Greek islands, only 28 are interconnected to the main national power grid. These islands obtain their electricity primarily from diesel generators, which are subsidised to lower tariffs in these areas (720 million euros was spent by the government in 2016). Total production from these generators was 3,604 GWh in 2016. Current plans to connect the majority of these islands to the mainland by 2030 (see Figure 11) are likely overly optimistic, given the current economic situation. This therefore presents a sizeable opportunity for LPG to displace more expensive, carbon intensive options before more significant renewables penetration.

In the country generally, natural gas is increasingly playing a larger role in meeting the country’s electricity needs. However, it has to be imported at significant cost from Russia, Turkey and Algeria. Greece is looking to sign new contracts for gas supplies as well as develop the transmission system (by updating the existing LNG terminal, building a new pipeline and an underground gas storage facility). However, Greece struggled to meet its growing gas demand during winter 2016. LPG could provide part of the solution in the short term if Greece faces similar gas shortages in the near future. Gas power producers are also required to hold back-up reserves (at least five days’ worth) of alternative fuel – LPG could provide this alternative, at least in part.

The Greek energy market is undergoing structural changes to meet the challenges of the implementation of the EU target electricity model – part of the ‘ENTSO-E’ effort to integrate European electricity markets. This involves the creation of a more liberalised market in the wholesale, retail and generation sectors in electricity and gas, privatisation of state assets, as well as the support of new renewables.

Greece has major LPG import/export terminals in Asporopyrgos and Elefsis, both of which are close to Athens.

Many of the global engine manufacturers are active in Greece, a good number of which already have installations on the islands. Wärtsilä, Mitsubishi, MAN, B&W have provided engines to Greek islands in the past, which run mainly on heavy fuel oil. Deutz and CAT have supplied natural gas engines.

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